Update on EPA Negotiations

1. Update on EPA Negotiations Presentation to the Portfolio Committee on Foreign Affairs and Select Committee on Economic and Foreign Affairs 18 June 2008 By Dr Rob Davies Deputy Minister, Trade and Industry

2. Origin and Stated Objectives of EPAs • EPAs emerged as EU’s proposal for WTO compatible alternative to Cotonou preferences (WTO waiver for which expired 31/12/07) • Stated objectives included commitment that EPAs would support regional integration and EU had no mercantilist objectives • Also touted as a platform for EU to provide enhanced support across wider platform

3. SADC-EU EPA Configuration • Process of negotiation not with ACP as a whole, but separate regions… • SADC members in different configurations (MZZ in ESA group, DRC in CEMAC, Tanzania in EAC); • SADC configuration SACU plus AM(T); • EPA negotiations coincided with TDCA review; • In interests of regional integration and harmonised relationship with EU, SA joined SADC EPA process;

4. SADC EU Interim EPA • As deadline loomed EU agreed to a two-phase process • To negotiate an Interim EPA as step to full EPA to be concluded after December 2007 • IEPA to focus on trade in goods but must include commitment to agreement to negotiate reciprocal liberalisation of “substantially all” trade in services within 4 years of tabling of IEPA” • Commitment to negotiate agreement on investment

5. Interim EPA • Schedule of Trade in Goods component of IEPA largely agreed but EC suspends tariff negotiations with SA • Legal text included number of contentious new issues only raised late in process, including: • Definition of Parties (implying acting collectively) could lead to SADC EPA having to act together (requiring consensus) in complaints against EU; and EU being able to act against all in complaint against one;

6. Interim EPA • Structures and procedures of EPA Council and Implementing structure that will create powerful new body that could trump SACU or SADC • This all presumes sophisticated decision making procedures in SADC EPA group (which is neither SADC nor SACU); • Onerous (WTO plus) customs administration procedures would allow EU to unilaterally withdraw tariff concessions;

7. Interim EPA • Requirement to ban export taxes (an increasingly important element of minerals beneficiation strategies); • A “More Favoured Nation Clause” requiring extension on line by line basis of any more favourable treatment to 3rd parties with more than 1% of world trade (China, India, Brazil etc) to EU

8. Interim EPA • MFN clause major impediment to trade diversification and South-South trade; • SA refused to initial, BLSM did, and N did later but under protest; • Decisions to initial taken without reference to SACU processes

9. Interim EPA • The EPA is fragmenting integration in Southern Africa • SADC has four sets of separate trade relations and regimes with the EU and each vary from one another • Will complicate – even foreclose - efforts to build a single trade regime in the region, and between the region and the EU - the region’s single most important trade partner • Separate arrangements create basis for new generation of trade policy division in region on services, investment, competition, and procurement • EPA threatens to break up SACU as different commitments require creating new customs borders within SACU • EPA will undermine efforts to build common SACU policies in new areas

10. Interim EPA • Many ACP countries faced a difficult choice in December 2007: Initial the Interim EPA that contained egregious provisions, or destroy important export sectors • South Africa has consistently raised concerns • It is clear that many other ACP countries share the concerns (only 35 of 78 ACP countries initialed) • Strong concerns expressed at the Africa-EU Summit, the ACP Ministerial Meeting, the AU Summit, and several AU Ministers meetings

11. Recent Developments • SADC EPA-EC Ministers in March 2008 agreed that a parallel process begin to examine concerns • Bilateral SA-EC in early May, senior officials agreed to re-start stalled SA-EC tariff negotiations with view to forging a common SACU tariff offer • At SADC-EC negotiating session 19 May, Angola, Namibia and SA issued a joint concerns paper • ANSA will follow up with specific drafting proposals • The May Session saw progress in tariff negotiations

12. Recent Developments • On 27 May, EU Council adopted important conclusions that: • Acknowledged concerns expressed by some ACP countries • Called on Commission to be flexible and take account of different needs of ACP countries and regions • ACP countries should be able to draw on favourable provisions negotiated in other EPA regions • In moving to final EPA, the Commission must ensure outcome supports existing regional integration processes

13. Next Steps • Council conclusions must be carried into negotiating process • Immediate urgency is to avoid rushing to sign and ratify Interim EPA (current proposal: 1 July 2008) • Arbitrary deadline must not compromise effort to address substantive concerns and ensure regional approach • Need to continue to raise/clarify concerns with the EU members, Parliament and Commission • We should note the more entrenched divisions in SADC and impending threat to SACU • More work to build regional consensus and positions on all issues among all SACU and SADC Members